France Is Buying Faster Trains for Slow Tracks to Save Jobs

The French government on Tuesday ordered 21 high speed TGV trains, most of which may never run on a suitable fast track, in a pre-election bid to preserve jobs at an historic locomotive plant.

Six months ahead of an election in which unemployment and a sagging economy are key issues, President Francois Hollande is fighting a rearguard action to win a second term, promising he can bring down a rising jobless rate that is above 10%.

The orders for trainmaker group Alstom, which is 20% government owned, are worth as much as 630 million euros ($704 million), a source told Reuters.

Alstom—whose checkered history has symbolized French industrial decline for years—put Hollande's pledge to the test last month, saying it would transfer 400 of the 480 jobs at its Belfort site in eastern France to another plant, ending over a century of manufacturing there due to a lack of orders.

Despite the relatively small number of jobs involved—joblessness in France rose by 50,000 in August—opposition politicians seized on Belfort's symbolic significance and ministers quickly promised action.

Industry Minister Christophe Sirugue outlined the response in Belfort, a city of 50,000 people where Alstom started building steam engines in the late 19th century, saying the government would place a direct order for 15 high-speed TGV trains to run on lines in the south of the country.

There are plans to upgrade southern routes to accommodate TGV speeds, but there are also doubts about when, and even whether, this will happen. French senators last month called for a 15 year freeze on financing for new TGV lines.

On top of the 15, state rail operator SNCF is confirming a long-awaited order for six more TGVs for a future high-speed link between Paris and the Italian cities of Milan and Turin. Approval for that upgrade came in 2015 but work on it has yet to start in earnest.

Sirugue also promised a 70 million euro investment by Alstom to help transform the factory into a European train maintenance hub and plans for a research center on electrification, as well as confirmation of twenty orders for locomotives designed for recovering broken down trains and another 30 intercity trains.

Finance Minister Michel Sapin told Reuters he did not expect any state aid problems with European competition authorities, while Laurent Berger, leader of the CFDT labor union said the move was vital to protect jobs and would see Belfort through a rough patch.

But others accuse the government of waking up late to the issue for largely electoral reasons, and say putting expensive high-speed rolling stock onto a traditional rail system will also increase SNCF's operating costs.

"You're buying a Ferrari to drive up and down a country lane for 10 years," economist Nicolas Bouzou said on BFM TV.

Alstom's Presidential Past

Governments of both right and left in France have intervened to protect industrial champions from globalization and Alstom has already touched the careers of a number of next year's potential presidential candidates.

When more than 12 years ago Alstom was struggling, Germany's Siemens wanted to buy its power turbines division, but Nicolas Sarkozy, then the finance and economy minister and later French president, organized a 2004 state bailout.

Sarkozy hopes to represent the center-right Les Republicains and its allies again in 2017's presidential poll.

This time the successful buyer of the power business was U.S.-based General Electric(ge), putting Hollande and his then economy minister Arnaud Montebourg—also a candidate for next year's presidential elections—in the firing line.

Alstom's latest bombshell, on Sept. 7, came just months after Montebourg's replacement, Emmanuel Macron, promised to protect the Belfort workforce.

Macron resigned from his post this summer to prepare for his own potential presidential campaign.